CBK’s 21-year Infrastructure Bond Issuance Sees Huge Oversubscription

Kenya's total receipts for the August period of the current fiscal surged 34 per cent, to Ksh 125.3 billion compared to Ksh 93.5 billion similar period in FY 2020/21.

Central Bank of Kenya’s (CBK) September twenty-one-year infrastructure bond issuance attracted a subscription worth Ksh 151 billion with Ksh 106 billion being accepted.

The original issue plan was to raise Kshs 75 billion with proceeds being used to fund infrastructure projects in the 2021/2022 National Budget Estimates.

The oversubscription, 201.67%, was largely attributed to the high market liquidity as had been projected by market analysts.

“We expect the paper to be well bid. However, the absorption might be dependent on how market bids and the real appetite for the funds by the sovereign,” Stephanie Kimani, NCBA Market Research had said.

However, private sector credit remains weak in the single digits for more than 3-years, NCBA notes adding that “the sharp decline in interest rates in the period notwithstanding”. 

“That said, the upward pressure on funding costs for banks as benchmark interest rates rise could see an increase in lending rates, which may potentially weaken credit access for some sections of the economy,” NCBA September Report alludes.

Jimnah Mbaru, an Investment Banker further adds that “This shows that there is a lot of money not being invested. This is a sad situation. It reflects delayed investments. Is political uncertainty to blame?

The infrastructure bond will be listed on the Nairobi Securities Exchange with its secondary trading in multiples of KSh 50,000.00 to commence on Tuesday, 14th September 2021.